Archive for Tuesday, March 15, 2011

Senate president outlines new state pension plan, plans to increase funding by $23 million

March 15, 2011


— The Senate leader unveiled a plan Tuesday for tackling the Kansas pension system's long-term funding problems that would require teachers and government workers to pay more for their future benefits but that demands fewer concessions from the workers than a competing House bill.

Senate President Steve Morris, a Republican from Hugoton who is also chairman of the special Senate committee on pensions, said pension reform is needed to maintain the system's viability. He said he expects the committee to debate his plan Friday.

The Kansas Public Employees Retirement System, or KPERS, faces a $7.7 billion gap between its anticipated revenues and the benefits promised to teachers and government workers over the next several decades.

Morris' bill would raise the state's annual contribution to KPERS by $23 million, starting July 1, 2013, and that's the most aggressive funding increase yet proposed. The House plan would increase the annual commitment by $10 million, also starting in 2013.

About 131,500 teachers and government workers covered by KPERS now pay 4 percent of their salaries to the pension fund. Under the Senate plan, that would rise to 6 percent by 2016, though those workers would get a small boost in their promised benefits in exchange.

Another 20,000 employees, hired after June 2009, already pay 6 percent of their salaries into the pension fund, and they've been promised annual cost-of-living adjustments in their benefits after they retire.

Under the Senate plan, they'd have the choice of keeping those annual adjustments and paying 8 percent of their pay into the pension system, or forgoing the future adjustments and paying 6 percent into the fund.

The Senate plan also would set up a commission to study and possibly recommend even more sweeping changes in the pension system by December, and give legislators until June 2012 to act upon them.

Sen. Laura Kelly, of Topeka, the pension committee's ranking Democrat, said she wants to see how the Senate plan would affect individual state employees before committing to changes but acknowledged, "We've got to do something with KPERS."

"We've got to structure it in some way that sustains it over the long haul," she said.

The Senate committee made a key modification Tuesday to Morris' proposal that may complicate the debate. At the suggestion of Sen. John Vratil, a Leawood Republican, it added language saying the state reserves the right to make future changes in its pension plans.

Many Kansas officials have long assumed that because of Kansas law and past court decisions, the state can't go too far in forcing concessions from teachers and government workers. Morris' proposal largely follows the conventional wisdom, but Vratil's language is designed to give the state the legal standing to go further.

"Our hands are pretty much tied right now," Vratil said. "This would give us a little more flexibility."

But Kelly said: "That puts all the balls in one side of the court, and I'm not sure that's exactly fair."

The House plan, drafted by its Pensions and Benefits Committee, goes against the convention wisdom that the state has little room to force concessions public employees. A key provision changes how pension benefits will be calculated for teachers and government workers after July 1, 2013, giving them 20 percent less credit for each year of service after that date.

But the committee backed off other provisions raising the age at which many workers could claim full retirement benefits. Chairman Mitch Holmes, a St. John Republican, said Tuesday that the provisions appeared to cause technical problems for KPERS.

The committee wanted to scrap a rule that allows some employees to retire with full benefits in their 50s if they have enough years of service. But the committee didn't want to get rid of early retirement altogether and its solution — raising the age for full benefits to 67 for some workers — didn't mesh with keeping some form of early retirement.

The House panel endorsed its legislation last week but pulled it back Monday and stripped out the provisions dealing with the retirement age. It then endorsed the new version, sending it to the House for debate.


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